I apologize for the long absence of any new content on this blog; however, I took a hiatus during tax season and have had a tough time getting back on track. In any event, a client of mine recently raised a question which I believe may be relevant to many of you – how long should I keep my records? If record space is a concern for you consider the following:
Generic tax rules
- Keep all tax (or potential tax) records for three years from the later of April 15 (after the tax year) or when the original tax return was filed or after an amended tax return was filed.
- Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction on the tax return.
- Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return. Yes the statute of limitations is extended if there is an understatement of tax in excess of 25%. Hard to know what you don’t know but I assume this does not apply to any of you?
- Keep records indefinitely if you do not file a return. If you didn’t file because you were below the filing thresholds, this should not be much of an issue.
- Keep records indefinitely if you file a fraudulent return. Yes the statute never runs out if you commit fraud so please don’t do that!
- If you have a business with employees you should keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later?